Dollar touches 23-year high

The US dollar touched a 23-year high against sterling and a six-week high versus the euro on Friday as weak UK and euro zone data led investors to take refuge in the greenback. The dollar pared gains in late trading in New York as US stocks rebounded and crude prices surged, easing some risk aversion.
The pound and euro fell to session lows right after data showed the UK economy contracted by 1.5 percent in the fourth quarter, far more than analysts had expected and confirming a recession. Investors took little encouragement from surveys showing the euro-zone manufacturing and services sectors contracted at a slightly slower pace in January, since they remain deep in recessionary territory. The yen jumped on the back of its perceived safe-haven status, hitting record highs against the pound and nearing seven-year highs against the euro.
The US dollar and the yen "continue to benefit from the weak financial and economic environment" said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York. The euro touched a six-week low against the dollar at $1.2766 earlier, but it last traded little changed at $1.2989.
The pound tumbled to hit another 23-year low of $1.3502 before recovering to $1.3799, down 0.4 percent on the day. Sterling has come under severe pressure recently as worries about a very weak economy have combined with concerns about the UK's troubled banking sector and the parlous state of government finances.
The dollar was also supported by comments from US Treasury Secretary nominee Timothy Geithner, who said a strong dollar is in the interest of the United States. His remarks came on Thursday when he won the Senate Finance Committee's backing to head the US Treasury.
The yen edged higher with the euro down 0.1 percent at 115.20 yen. It recently traded at a seven-year low just above 112 yen. The dollar was last almost flat against the yen at 88.80 yen in a volatile session in which the greenback swung between gains and losses.
"We have these moves overnight (in dollar/yen) and then Europe uses us to square up," said John McCarthy, director of foreign exchange trading at ING Capital Markets. "When the dust settles the Dow is down". Lower US stocks, exemplified by the Dow Jones industrial average, typically indicate risk aversion and make the yen slightly more preferable to the dollar.
The Dow industrials were down 0.4 percent on Friday, while the Nasdaq was up. Traders said the yen remained well-bid as a relatively safe currency due to worries about the deepening global recession. This weighed on riskier and higher-yielding currencies, with the Australian dollar touching its lowest against the US dollar since early December at $0.6420. Investors were on the lookout for any comments from Japanese authorities on possible currency intervention to stem the yen's rise.